Risk mitigation scores remain elevated in Canadian agriculture

Risk is unavoidable in agriculture, making risk management a key contributor to a farm’s success. In 2020, we analyzed the risk management strategies of Canadian farm operations in a survey about risk perceptions and producers’ implementation of relevant risk management strategies. The last two years have brought new challenges: inflation and rising interest rates, the war in Ukraine, supply chain disruptions, and beyond. So, time for an update!

How we measured

In July, we used the FCC Vision Panel to understand the influence of the evolving operating environment on risk mitigation strategies.

We grouped risks into five categories:

1. Production
2. Market
3. Financial
4. Human resources
5. Legal

Each theme includes multiple specific risks. For example, financial risks include interest rate, working capital, debt repayment, and operating costs.

We constructed a scorecard that measures how producers within a sector match their level of concern (on a scale of 0 to 3) with available risk management tools (for example, I have a business plan, off-farm income, utilize accrual accounting to make decisions).

The individual scores are weighted based on the respondents’ risk tolerance level, defined as risk averse, risk neutral, or risk preferring. A score of 100% would indicate that, for every risk identified, there is an appropriate strategy to mitigate. Conversely, zero would indicate there is no appropriate risk mitigation strategy... Read More